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Opinion: The Nobel Prize for Free Markets

Editorial board member Steve Moore on University of Chicago economist Eugene Fama's work and its implications for government policy.

This transcript has been automatically generated and may not be 100% accurate.

... I ... welcome back to Opinion Journal I'm Mary Kissel ... the Americans won the Nobel Prize for economics in these last hours Eugene Fama ... wines Peter hearts and hands and Robert Shiller ... here's Jen and her crystal ... announcing the war ... the main idea here ... is that ... investors forecasts ... may not be ... perfect in Russia ... periods of low prices ... that episode periods of excessive pessimists ... so the current understanding of the surprises ... relies in part on Russian investors on the concerns of overuse ... in part on psychology and behavioral finance ... fall must haves and Machinists research ... not only radically changed in the views among researchers ... but also influenced ... more good practice in many ways ... the ... were joins me now from Washington Steve ... a big win for free markets today right ... he really was Marian Baddeley another big win for universe to Chicago which I think that's about half of the Nobel prizes in economics ... and of course is the school Dome Freedman and ... really the birthplace of of of both got a free market comeback this is happen around the world ... you know I think what's interesting is not ... the Dr professor ... far ... Obama ... has really been a big advocate of the idea that that markets are efficient asset markets are efficient and that ... things are ... in most cases broccoli prime priced in each of the upper deck this individual stock picker ... in the short-term Woodstock is going to go up and which isn't Avago dots and so ... Eugene Fama is very famous for really being the ... kind of architect of the out ... of the index funds mutual fund where you just take a cut ... us a lot done number of stocks in you don't read it that when her son was again using the millions and millions of people it benefited from that not handles big fees ... I just just getting invested in some markets and track in the markets up and down ... but he doesn't believe very much and bank bailouts Hi there I wanna read you a quote Steve ... from an interview that the New Yorker did with Professor fallen back in twenty ten ... and I quote the extent we never ran is ... suppose the government steps aside and let these institutions fail ... how we've been taken to a UN scrambled everything and figured everything out ... my guess is maybe a week or two ... but the prom is over generated by the government stepping in ... those are going to be with us for the foreseeable future and quote ... Steve ... by Kate is Mr. it ... is but the Nobel committee basically endorsing views like this ... yes I think that the fall from which it won the Nobel prizes for saying that ... because it sets an unorthodox view every economist in Washington that I don't think ... oh my goodness we save the eye of the economy from a great depression by ... all of these bailouts in all of the of ... the money that we gave the bank sent a nice and let this one of sort itself out ... if the free market has not been allowed to work and is making another important point there and that interviewing say this many times over the years which is ... you know when you have any government intervention like this he creates a perception in the market that the government is creating a big safety net for any big bank or insurance company or auto company that may fail and he said We've is Dr unaided the idea ... of kind of too big to fail my mind how the times that politicians say it's not ... the one other interesting thing is that the other winner of the a word that the third winner was shot Mr. Schiller ... and Shiller has a very different view of all these markets work he believes there are these asset bubbles and that they're predictable ... I he is of course famous for that case Shiller index of how we're saying this is a big argument between the two were promise saying no you kept it that these things in advance ... with what is a bubble what isn't in Shiller's saying he can ... well is a larger lesson here seem that everything that we've been told since the financial crisis ... the new Consumer Financial Protection Bureau too big to fail Dodd Frank ... it is actually making markets less efficient more dangerous yet or prone to bubbles ... oh well but how exactly that's exactly what that when Mr Fama would say and I wouldn't be surprised if the sense that when he gives is no valid routes that ... we have actually made the economy shakier ... though we have made it more prone to financial crises because of these interventions like the ones that you just mentioned ... everything from ... Sarbanes Oxley ... I'd to to Dodd Frank to of course the too big to fail doctrine which is now really ... contradictory to the whole idea of efficient markets to begin with ... I it's it's it's incredible that these ideas to come back and back again it just goes to show ... really bad ideas never actually dying ... editorial board member Steve Moore thank so much for